Race is on for Iran’s (future) riches

By Pierre Briancon 

Europe Inc. is rushing to get in on the action.

The Germans want to sell their machine tools, the French their cars, the Italians their tubes. And the British hope to finance the whole trade.

After a few months of warming up, the race is on among Europeans to grab a piece of a market of 80 million people about to open up to Western business: Iran.
It will take another few months before it all comes together — “not before the beginning of next year, when things have become clearer, and sanctions have actually been lifted,” said Sasan Krenkler, the head of a German consulting firm specialized in trade with Iran.
But the mere prospect of an open Iranian market already has big and small companies as well as governments salivating at the prospect of reviving Europe’s once-vibrant and now-moribund trade with Tehran.
German Vice Chancellor Sigmar Gabriel, who is also the economy and energy minister, will lead a business delegation in Iran next week. French Foreign Minister Laurent Fabius — with foreign trade relations in his portfolio — has also announced he will soon make a Tehran trip, with the resumption of commerce his overt goal.
Crippled by six years of tough western sanctions and eights years of economic mismanagement by former President Mahmoud Ahmadinejad, the Iranian economy is expected to grow again after a long slump, at emerging-markets rates of 5 to 6 percent a year.
The country will recover the revenue lost in the years when it couldn’t sell its oil on world markets, and Europe Inc. is rushing to get back in on the bonanza.
Western companies would find reasons to rejoice even if trade simply rose back to its pre-sanction level: French exports to Iran, for example, have sunk to about €500 million last year, against more than €4 billion before sanctions hit.
Total EU exports to Iran last year amounted to little more than €6 billion, or 0.4 percent of total EU trade and about half what it was in 2008. Germany, once the largest exporter to Iran, has now been supplanted by China, India, South Korea and Turkey.
But the Iranian economy is looking for Western finance and goods. The national airline needs airplanes, and the planes it still has need parts. Gigantic oil and gas fields need western technology and finance to be efficiently explored.
“Infrastructure — from railways to roads to water installations — needs major investments,” said Thierry Coville, a research fellow and Iran specialist at the French Institute for International and Strategic Affairs.
As sanctions against Iran gradually grew stricter over the past decade, governments have sometimes had to pressure businesses to comply with them. In one such example, the French foreign ministry had to lean on oil company Total to force it to sever ties with Tehran six years ago.
Now, ironically, governments are urging their home companies not to lose time, and seize the new Iranian opportunity.
There are fears that some firms might have to pay a political price for their government’s attitude during the long, protracted negotiations over Iran’s nuclear program.
French businesses discreetly expressed their worries about the hard line taken by Fabius throughout the talks. But “Iranians are pragmatic,” says Krenkler. “The deals will be done on a strictly-business basis. Too much is at stake.”